The retail universe is being disrupted all over again. Years of expansion founded on low prices and rapid shipping are now suddenly facing two giant online retailers battling to hold onto their market share.
The abrupt shift in US trade policy put them into a sharp downturn, with spectacular declines in sales and drastic strategic course corrections beginning in May.
What went wrong? Why now? And what does it mean to consumers on the hunt for bargains? Let’s take a look.
A Quiet Change in Consumer Behavior
American consumers love super-cheap products shipped directly to their doorstep. But in these last few months, sales volumes collapsed overnight. Buyers began changing their buying habits because prices started rising and markdowns disappeared.
The Brands at Risk
The two firms under the microscope are Shein and Temu. Famous for low prices and infinite choices, the firms ballooned rapidly and became household names.
But today, the same strategies that made them household names are now their largest pitfalls as they face sharp drops in sales.
What Changed in May?
In May 2025, the US government implemented a significant policy change. It shut down the “de minimis” loophole, a policy that had permitted companies to bring goods valued under $800 into the country free of duties.
The shutdown happened May 2, 2025. For Shein and Temu, the loophole was crucial because it allowed them to keep costs extremely low. Price hikes and reports of sales drops appeared almost immediately after this date.
The Price Advantage Fades
Without the loophole, both brands lost their massive price advantage. The $3 cheap shirts and $15 low-cost sneakers that generated millions of orders were suddenly not cheap anymore; overnight.
Higher import tariffs compelled them to raise prices after May 2, and bargain hunters went elsewhere.
Sales Plummet
The effect was swift and drastic. During the first week after price hikes (early May), Shein US sales reportedly fell by up to 23 percent, and Temu by around 17 percent, depending on source.
The firms also cut back on their ad spend, making them less conspicuous to consumers. In retail, it’s very difficult to win back customers once they’ve gone elsewhere.
No Strong Customer Loyalty
Experts argue that most shoppers weren’t necessarily loyal to Shein or Temu; they cared about prices. The moment those discounts evaporated, loyalty didn’t last long.
Consumer research indicates that almost 30% of consumers will cut back or drop shopping at online retailers such as Shein, Temu, and AliExpress if prices increase. It’s a wake-up call that price trumps brand loyalty during tough times.
Strategic Realignment, Not Shutdown
Instead of closing stores, the two companies are changing strategies. They are testing other supply models and targeting international markets with fewer tariff barriers.
Although some operational adjustments are occurring, large U.S. facility closures are not on the horizon; in fact, both are expanding U.S. warehousing and local fulfillment.
Winners in the Shake-Up
Other stores are filling the void. Traditional discount stores like Dollar Tree, Target, and Walmart are drawing more traffic as customers search for cheaply priced options nearer their own homes. Online rivals are also gaining from diminished price pressure.
Changes at the Mall
Established mall retailers such as Zara, Asos, and even Aeropostale are picking up steam. They were bumping up against rock-bottom online competition.
Now that they don’t have to deal with as much price competition, they can lure consumers to their stores and sites.
New Strategies for Survival
Temu is moving towards US-headquartered fulfillment and partnering with local vendors to reduce hefty import charges.
Both brands are starting to focus more on international expansion, especially in Europe and other regions where investments and marketing spend have been rising.
Some Relief, But Challenges Remain
Although there have been discussions about changing tariff rates, no major reductions have benefited Shein or Temu.
The companies are still dealing with much higher costs now than when they could evade import taxes using the de minimis rule.
As a result, their products will likely remain more expensive for American buyers, making it hard for them to regain their old low-price advantage fully.
Global Trade Tensions
US-Chinese trade relations remain strained. Although tariffs still dominate the retail scene, other markets worldwide will become even more essential to these fashion giants. Given the new cost realities, reclaiming lost ground in the U.S. will be tough.
What It Means for Shoppers
Without the flood of deeply discounted merchandise, Americans will pay higher prices for mundane necessities such as clothing and small appliances.
While this will encourage some to shop elsewhere, many might feel the financial sting as they adjust to new retail norms.
The Road Ahead
The effect of tariff reshufflings on Shein and Temu in the US is a critical shift in how American consumers buy every day products.
The next several months will indicate whether the firms are able to reinvent their business models or if newcomers will fill the gap.
Either way, nothing is final yet — and consumers must prepare for further adjustments as trade policies continue to evolve.